Australia's economy is officially in its first recession in 29 years, after June quarter data revealed the nation's gross domestic product (GDP) had shrunk by 7%. The negative spike in growth followed a 0.3% drop in the March quarter, with the most recent figures showing the full impact of the first wave of coronavirus restrictions. Quarterly growth in June is the worst since records began, at a massive three times higher than the previous biggest contraction of 2% in 1974.
Data released by the Australian Bureau of Statistics (ABS) showed the biggest drop in GDP growth since records began in 1959. According to Treasurer Josh Frydenberg, "Our record run as a nation of 28 years of consecutive years of economic growth has officially come to an end... Today's devastating numbers confirm what every Australian knows - that COVID-19 has wreaked havoc on our economy and our lives like nothing we have ever experienced before.”
While Australia's sharp drop in growth is a fraction of the 20.4% reduction recorded in the United Kingdom, it highlights a very real negative position that is impossible to ignore. According to numbers from DFA, every part of Australia is affected by the slowdown, with mortgage holders likely to feel the pinch in the months and years ahead. More than 1.5 million Australians are now defined as suffering from mortgage stress, which is defined when households spend more than 30% of their income on repaying their home loan.
While every part of Australia is affected by the slowdown, some parts of the nation are affected more than most. Tasmania, Victoria, and Western Australia are the most likely to feel mortgage stress, including 48.8% of borrowing households in Tasmania and 44.2% in Victoria. People in Victoria are likely to see worsening conditions, with the second wave of the pandemic and its associated lockdown likely to create even more mortgage stress and defaults in the months ahead.
According to DFA Principal Martin North, Victoria's pain will likely be exacerbated by stage four restrictions: "The August 2020 data from our surveys continues to tell a sorry tale of more households feeling the pinch, whether they are mortgaged, renting or investing... Within the numbers there was a slid in Victoria in particular reflecting the latest lock down and the rising pressure on business there."